Singapore Government Securities (SGS) are issued to provide a robust government yield curve for the pricing of private debt securities.
What are Singapore Government Securities?
Singapore Government Securities (SGS) are debt securities issued by the Singapore Government. They pay interest over a fixed period and the principal sum on maturity.
SGS are considered safe investments fully backed by the Singapore Government. They are issued and managed by the Monetary Authority of Singapore (MAS) on behalf of the Government.
Singapore Government Securities (SGS) were initially issued to meet banks' needs for a risk-free asset in their liquid asset portfolios.
In 1998, MAS spearheaded efforts to enhance the efficiency and liquidity of the SGS market as part of its strategy to develop Singapore as an international debt hub. This was further refined in May 2000 with the introduction of a focused issuance programme aimed at building large and liquid benchmark bonds. This is done through larger issuance of new SGS bonds and re-openings of existing issues to enlarge the free float.
The Singapore Government operates a balanced budget policy and often enjoys budget surpluses. It does not need to fund its expenditure by issuing bonds to borrow money.
The Government issues SGS bonds and T-bills primarily to:
- Build a liquid SGS market to provide a robust government yield curve, which serves as a benchmark for the corporate debt market.
- Grow an active secondary market, both for cash transactions and derivatives, to enable efficient risk management.
- Encourage issuers and investors, both domestic and international, to participate in the Singapore bond market.
Government Securities Fund
The Government Securities Fund holds all proceeds from issuing SGS. The fund can only be used to pay the interest and principal sums of SGS. This ensures the Government’s borrowings are not used to fund its expenditure.
Types of SGS
There are three types of SGS:
- Treasury bills (T-bills) are short-term bonds that mature in one year or less from their issue date. They are traded at a price lower than their face value. When they mature, the Government pays the holder an amount of money equivalent to its face value. The Government currently offers 6-month and 1-year T-bills.
- SGS bonds are longer-term bonds which mature in 2, 5, 10, 15, 20 or 30 years. SGS bond holders receive a fixed sum of interest every six months before the bond matures and the face value of the bond upon maturity.
- Singapore Savings Bonds (SSBs) are non-marketable SGS for retail investors. They have a 10-year tenor but can be redeemed (in part or fully) by investors before maturity. The interest rate for SSBs increases the longer they are held. When the bond matures, investors will receive the outstanding amount of SSBs that they hold.
Market Depth and Breadth
Over the years, the amount of outstanding SGS has grown steadily from S$43.2 billion in 2000 to S$125 billion in 2018.
SGS bonds are also included within major bond indices including:
- Citi Global Government Bond Index
- JP Morgan Government Bond Index
- Markit iBoxx Asian Local Bond Index
SGS Annual Issuance Calendar
SGS bonds and T-bills are issued according to an , published at the end of October each year for the following year. The issuance calendar provides the issuance date and SGS to be issued at each auction. The amount offered will be published closer to the issuance date.
In designing the calendar, MAS takes into account market conditions, the need to concentrate liquidity in benchmark bonds and primary dealers' feedback.
Authority to Issue SGS
As the fiscal agent of the Singapore Government, MAS is empowered by the Development Loan Act and the Government Securities Act to undertake the issue and management of securities on behalf of the Government.
The amount of SGS issued is authorised by a resolution of Parliament and with the President's concurrence. Each year, MAS seeks approval from the Minister for Finance for the total SGS issuance amount for the new financial year. MAS decides, in consultation with the SGS primary dealers, the timing and amount of individual bond issues.